How to Get Employee Owned? Part IV: Cooperatives

How to get to employee owned? Part 4. Cooperatives

As we grapple with rebuilding a new and better economy that is potentially fairer and more equitable, the question of employee ownership has started to come up more often.  There are many ways to get to employee owned.  Before attempting this feat, however, a business owner (or owners) should consider the why and the how.

How to get to employee owned?  Part I:  ESOP

How to get to employee owned?  Part II:  B Corp or Benefit Corporation

How to get to employee owned?  Part III: Equity Incentive Compensation

Employee Ownership through a Cooperative Structure.

Cooperatives are not just for grain elevators!  They are a great option if an enterprise wants to “employee” owned.  Known broadly as a Worker Cooperative, this is a business enterprise that the workers own and participate in the financial success of the enterprise, with the worker owners having democratic representation – one worker, one vote.  (What is a Worker Cooperative).

A cooperative is a specific business structure that is formed under state law – much like a corporation or a limited liability company is formed. What is unique about a cooperative, however, is that it is formed and operates for the benefit of its owner members.  In the case of a worker cooperative, the employees or workers are the owners.  Worker cooperatives tend to lend themselves to certain types of business operations; Maybe a specific trade such as teachers – EdVisions Cooperative EdVisions Cooperative . Or an industry like child care – the owners of A Child’s Place used a worker cooperative to transfer ownership to its employees.

If the goal is to obtain employee ownership through a worker cooperative, it is important to note that there are basically two types of cooperatives – classic cooperatives where who can be an owner and investor is limited either by dividend and voting restrictions or hybrid cooperatives where outside investment is possible, but a patron membership group is still required.

The cooperative is a powerful option in the right circumstances, providing a power engine for change.  Take for example Evergreen Cooperatives of Cleveland where the cooperative structure is being used to building thriving employee-owned business that transform communities.

Maybe the ultimate in employee owned, worker cooperatives may be the next big thing as our business climate transforms with a push towards a more fair and equitable economy.

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Kimberly Lowe

Kimberly Lowe

For over 20 years I have lawyered from the trenches with experience based on a comprehensive knowledge and understanding of how both for-profit and nonprofit enterprises operate. I guide entrepreneurs, executive management teams, boards of directors, multigenerational families, shareholders and investors through all aspects of the business life cycle from formation to operation to exit. Read Kim's Bio.

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